No. of Recommendations: 28
"Valuation matters.... Cisco still hasn't passed it's year 2000 high... a monstrously bad investment even while being a good-great company the whole time." This comment reminds me of a famous quote:
‘At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?’ -
Scott McNealy, Business Week, 2002Here is a diagram showing price/revenue ratios for every Nasdaq 100 stock, at the close of market today.
finviz.com: Nasdaq 100Palantir at 121x price/revenue is priced almost as if you're actually buying fractional ownership of the US government.
Applovin at 36x, Tesla at 16x, Microstrategy at 172x (!), ARM at 43x, Crowdstrike at 29x, NVIDIA at 26x...
The market as it stands today makes dotcom mania anecdotes seem rather tame.
It is very important to get the pricing right on a high-quality stock - not 'to the penny', but certainly 'to the correct order of magnitude'.
TRS
